Steve Umidha @UmidhaSteve

Demand for locally-assembled vehicles is expected to soar owing to improved incentives by the government, going by the budget for the financial year (FY) 2021/22.

In his Thursday budget speech, Treasury Cabinet Secretary Ukur Yatani said the government would sustain its offer on various tax incentives to support local assembly of motor vehicles and motor cycles following the approval of 30 dealers in the last five years.

“I am pleased to note that the industry has responded positively to these interventions and to date, we have approved thirteen motor vehicles and seventeen motorcycle assemblers,” said Yatani.

The Ministry of Trade and Industrialisation in collaboration with the National Treasury and Kenya Revenue Authority has in recent years attempted to woo investments into the industry with goodies.

This includes removal of excise duty on locally assembled motor vehicles, duty-free importation of completely knocked down kits and a reduction of corporate tax from 30 to 15 per cent for the first five years of operation.

Assembled vehicles

As a result, such moves have seen companies operating vehicle assembly plants in Kenya increase production by nearly a third, following growing demand for locally assembled vehicles.

There has also been an increase in the number of firms with vehicle assembly lines and rising production capacity as various brands look to take advantage of incentives by the government.

Vehicle car dealers produced a combined 6,307 units between January and October 2019, which is 30 per cent more than the 4,820 produced over a similar period in 2018, according to data by the Kenya National Bureau of Statistics. This signals a steady rise since such calls were made.

“These local assemblers have created employment opportunities while also saving the country substantial foreign exchange,” noted Yatani in his speech.

While the assembly of commercial vehicles has registered an impressive growth, the passenger category of motor vehicles has remained underdeveloped in the last two years, raising concerns about the sector. Kenya has in the recent past mulled importing the rapid movement buses from South Africa.

This category is still dominated by imported used vehicles comprising, over 70 per cent of passenger vehicles, which is largely attributed to the high cost of assembly.

Affordable vehicles

As a result the Treasury CS says that the government is working on a framework to support the assembly of affordable passenger vehicles with stakeholder consultations believed to be in its final stages for the adoption of a comprehensive policy and administrative reforms to fully entrench local assembly of motor vehicles and motorcycles.

Kenya is developing a Draft National Automotive Policy in consultation with Kenya vehicle manufacturers and auto vehicle companies whose outcome is expected to be ready and will pave the way for the ban on importation of second-hand vehicles.

The new piece of legislation is also meant to shield local vehicle manufacturers from what new vehicle dealers believe is unfair market competition brought by importers of second-hand vehicles.